Tribunal Lacks authority to negotiate or establish New Agreements on behalf of Parties
The Honorable Supreme Court, constituted by the bench of Justices K. M. Joseph and B.V. Nagarthna, recently overturned a judgment issued by the Appellate Tribunal for Electricity (APTEL). The Supreme Court addressed the question of whether the Tribunal has the authority to renegotiate the terms of an agreement on behalf of the parties. The Court examined if the Commission under Section 79 of the Electricity Act, 2003 has a plenary power that could be characterized as an all-encompassing authority, enabling the Tribunal to disregard the contract’s express language, uncover a new change in law unanticipated by the parties, or ultimately rewrite the contract and establish a new agreement.
In Paragraph 95, the Supreme Court concluded that when a matter is governed by the contract’s explicit terms, it may not be permissible for the Commission, even as a regulatory body, to overstep those terms.
In its interpretation of the case Energy Watchdog v. Central Electricity Regulatory Commission and Others (2017) 14 SCC 80, the Supreme Court observed that when the Commission is asked to exercise power under Section 63, it is beholden to the guidelines as it cannot depart from the same,” and that “in an area where the guidelines do not occupy the field, undoubtedly, the Commission is clothed with power as a regulatory body.
The Supreme Court expressed strong disapproval at the Tribunal’s findings, which were made without any supporting evidence and carried significant consequences. The Court allowed the appeals, stating that “the Tribunal was wrong in brushing aside the specific and unambiguous disclaimers under which the procurers stood exonerated from liability,” and that there was no change in law according to the terms of the PPA.
It has also been held that to successfully invoke change in law by the Generating Company, it must demonstrate that there was an interpretation earlier to or as on the date of the cut off date which was advantageous to the Generator and there has been a change in the said interpretation after the cut off date.
This ruling has been made in the context of Civil Appeals filed by Haryana Discoms, Punjab Discoms, Rajasthan Discoms, MP Discoms, UP Discoms, and Tata Power Distribution, which challenged the claims awarded by the Tribunal in favor of Sasan Power concerning (a) increased costs due to changes in the water intake system, (b) custom duty paid on mining equipment, and (c) the formula provided in the Power Purchase Agreement (“PPA”) for calculating relief on account of changes in the law.
Judgement: JUDGMENT DTD 06.04.2023 IN CA NO 11826 OF 2018
The team at R Associates, led by Shubham Arya (Partner) and Poorva Saigal (Partner) and comprising team members involving Pallavi Saigal (Senior Associate), Ravi Nair (Associate) Shikha Sood (Associate), Reeha Singh (Associate) and Anumeha Smiti (Associate) represented Haryana and Rajasthan Distribution Licensees before the Supreme Court.
